The US dollar fell sharply on Monday as risk-on trade and falling US Treasury yields weighed heavily on the safe-haven currency.
Sterling is subdued at the start of today’s session, with GBP/EUR flat at €1.1395 and GBP/USD ticking lower at $1.3712. GBP/CAD is muted at C$1.7525 while GBP/AUD and GBP/NZD are holding steady at AU$1.7889 and NZ$1.9066, respectively.
Coming up today, as investors look ahead to the $1.9 trillion US stimulus package, shifts in market risk appetite look set to drive currency movement, while stalling German industrial production figures released this morning look likely to pressure the euro.
What’s been happening?The US dollar found itself forced to relinquish some of its recent gains at the end of last week as the latest US non-farm payroll release failed to inspire confidence in the US jobs market.
January’s release saw only 49,000 jobs added by the US economy, which alongside a revision to December’s figures from -140,000 to -227,000, unwound some of the recent optimism regarding the pace of the US economic recovery.
This pull back in the US dollar provided some much needed relief to the euro, which after spending most of the week on the back foot was finally able to claw back some ground on Friday.
However, these gains were tempered somewhat by some disappointing factory order data from Germany, as a surprising slump in order growth in December spooked EUR investors who are well aware how important the manufacturing sector has been to the German economy throughout the pandemic.
The pound, meanwhile, mostly held its ground on Friday, allowing Sterling to consolidate its gains from the previous session following the Bank of England’s (BoE) hawkish turn.
What’s coming up?Turning to this week, the most high-profile data release of the session looks to be the publication of the UK’s latest preliminary GDP release.
This is likely to report that the UK economy contracted in the last quarter of 2020 as a result of the second national lockdown, and is likely to put pressure on the pound later in the week.
In the meantime, the publication of Germany’s latest industrial production figures earlier this morning looks to put some pressure on the euro today, after reporting factory output stalled at the end of last year.
Across the pond, the focus this week will be on the latest US consumer price index, where another acceleration in domestic inflation could reignite the US dollar’s bullish bias.
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)